Corruption and Inequality

The first “Alternatives” class at the Osher Lifetime Learning Institute (OLLI) began with our watching an informative TED talk by Richard Wilkinson on how economic inequality harms societies. If you look at a long list of health and social problems, such as life expectancy, math and literacy, infant mortality, violence, imprisonment, teenage births, trust, obesity, mental illness, addiction, and social morality, there is little correlation between the wealth of the nations, but a very strong correlation between income inequality. The same relationship is also true within a nation. If you look at rich states and poor states there is little relationship to social problems, but if you look at the states with large gaps between the rich and the poor, social problems are also much worse. The UNICEF index of child wellbeing shows the same thing. Children do better in societies with less income inequality, but there is little relationship to the wealth of the nations. Having a big gap between the rich and the poor harms all societies. The people in societies with little income inequality were happier and healthier.

Some nations like Japan have little differences in wages. Other nations like Sweden have huge differences in how much people make, but tax policies and social programs like welfare and health care, reduce the stress associated high inequality. In the U.S., most people are limited by their wages. When jobs are scarce people are willing to work for less. The rich, however, have few constraints. CEOs make 400 times what the average worker gets, even when they do a poor job. Hedge fund managers and derivative traders are even worse because they actually harm the economy. They make a thousand times as much as an average worker, while being taxed at a much lower rate. That is why 93 percent of the recovery went to the richest 1 percent.

Franklin Roosevelt did something about the huge income disparities of the time. He wanted a maximum wage in which income above $40,000 (equivalent to $582,400 today) would be taxed at 100 percent. Congress didn’t approve that, but they did increase the top tax rate to 88 percent with another 5 percent “victory tax” with post-war credits. This resulted in a long period of stability and satisfaction until the 1970s when tax rates were lowered. Today in the most egalitarian nations, the rich make about 3.5 times what the poor make. In the most unequal countries that ratio is about 10. The US. is about 8.5.

There is talk of tax reform now, but conservatives want to eliminate progressive taxes and replace them with flat or sales taxes that would hurt the poor while giving the rich huge breaks. This would increase inequality dramatically and make all of our social problems worse. A fair plan would include a carbon tax to reduce global warming, be more progressive to reduce inequality, and also include a financial transaction tax that would tax hedge funds, derivatives and leveraged transactions, because that is where the most money is. There are $700 trillion in derivative products being sold, while the entire Gross World Product is only a 10th of that. An automated payment transaction tax of only 0.6 percent every time any money is moved, would eliminate the need for all federal and state income taxes, sales taxes, excise taxes and corporate taxes. See apttax.com

Corruption follows inequality. The most corrupt nations have low standards of living, weak or repressive governments, and great income inequality. The worst is Somalia followed by Myanmar, Afghanistan and Iraq. The least corrupt nations have strong governments with anti-corruption laws, a high quality of living, little inequality, and a good social safety net, The best are Singapore, Denmark, Finland, Sweden and Canada. The U.S. ranked 20th.

Power corrupts. Democracies can counter corrupt leaders by voting for replacements, but this option is short circuited when the rich can buy elections and skew policy to benefit the rich. The Citizen’s United case eliminated most campaign finance laws and allowed the rich and the corporations to influence elections and lawmakers with unlimited anonymous cash. This legalized corruption will increase income inequality and thus all of our social ills. If we are truly a democracy of, by, and for the people, we need to get money out of politics. The future of the nation depends on overturning this ruling. Move to Amend and many other organizations are working to amend the Constitution to clearly establish that corporations are not people and money is not speech. See movetoamend.org/other-amendments

Jerry Brule facilities the “Alternatives” discussion group at the UO’s Osher Lifetime Learning Institute (see osher.oregon.edu). This essay was reviewed by the class before submission to EW. The views and opinions expressed in this essay are solely those of the writer, and do not represent those of the Osher Lifelong Learning Institute or the UO.

About the Author

Jerry Brule facilitates a class at Osher Livelong Living Institute in Eugene/Springfield called “Solutions,” which attempts to answer the world's greatest problems. Opinions expressed are those of the author and do not represent OLLI.